4. A system to ensure that the directors of F-tech and all F-tech subsidiaries can conduct the business performances efficiently

i)  Based on the principle of this system, the Board Meeting is to be held once a month and if necessary, extraordinary Board Meeting is to be held. In case of making an important decision, the Management Meeting, which the Operating Adviser and above attend, and SED (or Sales Div., Engineering Div. and Research and Development Div.) meeting are to be held before the Board meeting for the purpose of conducting business activities more effectively. The result of the Board Meeting held after the mentioned above meeting is the final and is to be carried out.

ii) As to the overseas business, three (3) management directors are assigned in North America, China, and Asia respectively in order for each region to achieve self-reliance and perform business activities productively.

iii) As to the implementation of the business activities decided and approved at the Board Meeting, the person responsible and the details of such business activities are determined according to the four (4) internal regulations, i.e., “List of Dividing Duties of Directors and Officers”, “Rules of Organization”, “Regulations of Administrative Authority” and “Guidelines for Affiliated Companies”.

iv) By introducing the Operative Officer system, F-tech has established the structure that clarifies delegation of authority to Operating Officer and enhancing the checking function of Directors while business speed is maintained, and operations are executed efficiently.

5.  A system to ensure the accountability of F-tech and all F-tech subsidiaries business

i)  The Board of Directors and CEO of F-tech establish the corporate vision and management policies and notify F-tech and all F-tech subsidiaries. Based on “Our Action Guidelines” applicable to F-tech as well as all F-tech subsidiaries, F-tech has established the company compliance.

ii) As to F-tech subsidiaries’ operation and important management matters, F-tech requires the preliminary approval or report according to the “Guidelines for Affiliated Companies”.
“Guidelines for Affiliated Companies” also defines the authority for F-tech subsidiaries operation so that appropriateness of the operation is maintained.

iii) In the case where management finds out critical matter(s) which can or actually violate the related laws/regulations and/or other business compliance, it needs to be reported to “Corporate Ethics Kaizen Window” immediately, then the “Corporate Ethics Committee” or other related organization will report to the Board of Directors the investigation results as well as the countermeasures to such critical matter(s).

iv) To the antisocial forces that threaten the social order and corporate healthy operations, F-tech and all F-tech subsidiaries, as a whole, assume a resolute attitude. The structure to refuse to have business or other relationship with such antisocial forces has been established.

v) In order to maintain the appropriateness of F-tech as well as F-tech subsidiaries operation, the Internal Audit Office of Ftech are to conduct the business audit periodically.

6. When it is requested to have the employee(s) assist the operations of auditor(s), the structure ensures the independence of the employee(s) from the Director(s) and that the direction from the auditor(s) to the employee(s) is to be duly implemented

i)  Upon request from the auditor(s), F-tech assigns the employee(s) who assist exclusively or concurrently with other duties, and such employee(s) are to directly report to the auditor(s). The transfer, evaluation (including personnel evaluation), disciplinary action of the employee(s) shall be discussed and approved by the Board of Auditors preliminarily before the final decision in order to maintain their independence from the Board of Directors.

7.  A system for Director(s) and employee(s) to report to the Auditor(s), a system related to other reports to the Auditor(s), and a system to ensure the effectiveness of the Audit by auditor(s)

i)  It is stipulated that the Auditor(s) can attend important meetings including the Board Meeting and Management Meeting held at F-tech or all F-tech subsidiaries. Also, upon request of Auditor(s), the necessary information including meeting notice will be provided to the Auditor(s).

ii) A system has been established in compliance with the “Auditing Standards for Auditors” and “Reporting Standards for Auditors”, the Director(s), Operating Officer(s) and Employee(s) report to the Auditor(s) as to the cases mentioned below as well as the cases described in the standards.

[1] In case when the facts that can cause severe damages to the company is found

[2] The facts which has been reported to “Corporate Ethics Kaizen Window”

In line with this system, the Auditor(s) will ask to forward any reports from the Director(s), Operating Officer(s) and Employee(s) of F-tech and all F-tech subsidiaries, regardless of the two (2) cases mentioned above, when necessary.

iii) F-tech forbids to treat Director(s), Operating Officer(s) and Employee(s) of F-tech and all F-tech subsidiaries adversely who made reports to the Auditor(s), and ensures thorough awareness of this among the employees of F-tech and all F-tech subsidiaries

iv) The Auditor(s) can appoint lawyer, certified public accountant(s) and/or other advisor(s) as an assistant, when necessary, to conduct the auditing activities.

v) F-tech, upon discussion and decision with the responsible section(s), guarantees to compensate the exact amount to that (those) particular Auditor(s) who in advance burdened such cost out of his/her (their) pocket(s) or any debt shouldered in order to conduct the necessary auditing activities based on the Company law (Art. 388), except the cases where such declared amount is judged inappropriate.

8. A system to secure the reliability of financial report(s)

i)  F-tech, for the purpose of securing the reliability of financial report(s) and of editing and submitting the effective and appropriate Internal Controll System Report regulated in Article 24.4.4 of the Financial Instruments and Exchange Act, has established the Internal Control System under the instruction of President & CEO with Management Planning Division in center. We constantly examine whether this system is functioning appropriately and if necessary, makes adjustment to it. In addition, Internal Audit Office evaluates the current situation of Internal Control System.